Coast Guard Slams Contractors

That was Coast Guard Commandant Thad Allen’s opening salvo in what turned out to be a rather exciting little press conference down at Coastie HQ in southwest Washington, D.C. this morning. As cameras rolled, Allen laid out all of his issues with the controversial Deepwater modernization program, which aims to replace or upgrade all of the service’s ships, boats and airplanes over 20 years at a cost of $24 billion. The program is managed by the unlikely team of Lockheed Martin and Northrop Grumman, which together serve as “lead systems integrators,” meaning they have unprecedented freedom to divvy up the various contracts that make up Deepwater.

Needless to say, they have given most of the contracts to themselves, including an $87-million effort to stretch 8 110-foot patrol boats into 123-foot boats. Those ill-fated craft, which represent around 15 percent of the Coastie patrol boat fleet, were laid up last year with hull cracks and other problems allegedly stemming from cut corners and poor workmanship. Decommissioning them is equivalent to the Coast Guard telling Lockheed Martin and Northrop Grumman that the firms screwed up, big time.

“We will pursue all viably available commercial contractual, legal or other options for recouping any funds that might be owed the government as a result of the loss of these hulls,” Allen announced with a very grave expression. In other words, LockMart and Northrop just might get sued.

The broadsides kept on coming: “The Coast Guard will assume the lead role as systems integrator for all Coast Guard Deepwater assets,” Allen said, and the service will require that all future Deepwater work be opened up to competition. Lockheed and Northrop will return to mere contractor status. Ouch.

Is this the beginning of the end of the whole systems-integrator concept? Lately there’ve been calls across the military services for better oversight of big-ticket contracts. Most recently, the Navy canceled
Lockheed Martin’s latest Littoral Combat Ship after the vessel came in at almost twice its original cost estimate. The sea service has vowed to beef up its acquisitions force to prevent this kind of thing happening again. Kudos to the Coast Guard for taking even more drastic measures to remind industry that the military is the customer, and the customer is always right.